By Matthew Kreutzer
As inflation and pricing pressures intensify, many systems are confronting a widening gap between what the brand delivers and what still depends on the individual operator.
Inflation, pricing pressure, and uneven performance are creating friction across many franchise systems. But the most interesting part of that friction is not the pressure itself—it’s where the pressure is showing up.
From my vantage point—advising franchisors and, at times, franchisees—these pressures are not playing out primarily as operational challenges. Instead, they are showing up in expectations: what franchisees believe the system should deliver, what franchisors expect from their operators, and how those expectations align when performance comes under strain.
In some cases, the issue surfaces when a franchisee is struggling and begins to question whether the system is delivering what was promised—whether in marketing support, technology, or overall unit economics. In others, the franchisee may be performing well but still questioning the value of the relationship, particularly in light of rising costs and ongoing royalties. In both situations, the result is the same: increasing friction, a breakdown in alignment, and often discussions about exiting or unwinding the relationship.
What sits underneath many of these situations is a growing disconnect between how much weight is being placed on the system—brand, technology, and centralized support—and how much still depends on the individual operator’s presence and execution in the local market.
Stated differently, the pressure on franchise systems today isn’t just about inflation or pricing. Those forces are exposing something deeper: assumptions about what the system provides versus what the operator must still deliver.
From where I sit, that gap tends to appear in two overlapping ways. First, franchisees may expect the brand or system—particularly marketing or technology—to carry more of the burden of generating demand than it realistically can, especially in smaller or emerging systems. Second, operators may underestimate the level of personal effort, local engagement, and day-to-day execution required to make the business work.
Those expectations are not necessarily unreasonable in isolation. Over the past several years, many systems have emphasized the strength of their brand, marketing capabilities, or technology platforms. At the same time, broader economic conditions—particularly during and immediately after COVID—helped mask underlying weaknesses. Relief programs and a surge in consumer spending created tailwinds that made a variety of business models appear more resilient than they might otherwise have been.
As those conditions have normalized and consumers have become more selective, those same businesses are now being tested differently. When performance tightens, the question becomes more direct: what is driving results—the system, or the operator?
That question tends to surface most clearly in small to mid-sized franchise systems. Unlike large, nationally dominant brands that generate traffic through scale and brand recognition, these systems often depend far more on the individual operator’s presence in the market. Local relationships, community engagement, and hands-on involvement remain central to performance—even where brand and technology support are strong.
Where frustration builds is when those dynamics are not fully aligned on the front end. Franchisees may come to rely more heavily on centralized marketing, digital tools, or brand recognition than the system can reasonably deliver. Franchisors, in turn, may view underperformance primarily through the lens of operator execution, particularly where other units are performing well.
Neither perspective is inherently wrong. In many cases, both sides are responding to the same underlying pressure—but from different starting assumptions.
Pricing discussions can further highlight this tension. When costs rise or margins tighten, the ability—or inability—to adjust pricing brings those assumptions to the surface. Questions about pricing are not just about numbers; they are about responsibility—whether performance is driven primarily by brand strategy or local execution, and how that balance should shift over time.
What both sides may be underestimating is the continued importance of relationships—within the franchise system and in the local market. That includes the relationship between franchisor and franchisee, but also the franchisee’s connection to employees, customers, referral sources, and the broader community.
In many of the situations I see, friction escalates not simply because of economic pressure, but because of how that pressure is absorbed and communicated. Where expectations are not clearly aligned, it becomes easier for each side to attribute performance challenges to the other. Over time, that dynamic can make resolution more difficult than it needs to be.
None of this is new in franchising. But in the current environment, it is showing up more frequently and more visibly across different systems. Inflation, pricing pressure, and uneven performance are not just operational challenges—they are stress tests, and what they are revealing right now is not just where systems are under strain, but where the balance between the system and the operator may have quietly shifted too far in one direction.
Experienced in all facets of franchise law, Matt Kreutzer assists both startup and mature franchisors with developing, protecting, and licensing their franchise and distribution systems. As part of this practice, he counsels companies regarding the laws and regulations pertaining to franchising nationwide, and assists them in creating their contracts, Franchise Disclosure Documents, and other critical operational documents. He also responds to state administrative inquires and investigations and obtains exemptions and interpretive opinions from regulatory agencies. With his background in franchise litigation, Matt understands the risks inherent in the relationship and works with his clients to limit those risks allowing those franchisors to focus on brand and system growth.
Matt is certified by the California State Bar’s Board of Legal Specialization as a Franchise and Distribution Law Specialist in Franchise and Distribution Law.
Matt also helps potential franchise buyers understand contracts before signing on the dotted line. If franchise disputes cannot be avoided, Matt assists them in litigation or alternative dispute resolution.